Environmental Analysis

Strategic planning creates a blueprint for the future but it is generally performed within the context of a rapidly changing business environment. The external environment must be thoroughly analyzed and understood because of a number of factors that may have a profound impact on the organization’s viability and services in the future. Performing a comprehensive analysis of the organization’s internal work environment and related performance factors is just as important. Environmental analysis or environmental scanning provides critical information for the strategic planning process and it should not be performed as a one-time event. Significant changes, events and trends, both inside and outside an organization, must be monitored on a regular basis in order to make timely adjustments to the strategic plan. The figure below illustrates the basic concept of internal and external business environment.

One of the most important management tools often used early in the strategic planning process is the SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats). The SWOT analysis involves gathering inputs from multiple stakeholders, creates common understanding of the most critical issues, and provides systematic assessment of the organization’s internal strengths and weaknesses as well as opportunities and threats in the external environment. The SWOT analysis lays the foundation for setting priorities and helps the organization’s leaders leverage strengths and opportunities and take necessary actions to overcome or minimize weaknesses and threats. Just like the strategic planning process itself, the SWOT analysis can be performed at different levels within an organization. Depending on the situation, the same issue may represent both an opportunity and threat for an organization. For example, increasing volume of patients may be an opportunity to better serve the community, expand services, hire new staff, gain new skills and knowledge, generate additional revenues, purchase new equipment, etc. At the same time, rapidly increasing volume of patients may result in longer waiting lists, crowded work areas, staff dissatisfaction, and decreased quality of services. Information obtained through the SWOT analysis represents one of the key inputs for establishing attainable strategic goals. An example of the SWOT analysis is provided below.

PEST (Political, Economic, Social and Technological) analysis is another useful management tool that helps the organization analyze the external environment, understand the forces of change, make informed decisions, and determine strategic directions that take advantage of the opportunities.